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Wagner’s Nigam on the Affordable Care Act: How It Impacts Hospitals, and What’s to Come

September 28, 2012

Amit Nigam, assistant professor of management at the Robert F. Wagner Graduate School of Public Service, notes that the U.S., by far, spends more per person than any other affluent country on health care, yet 50 million Americans are uninsured, and our health outcomes—in terms of life expectancy and other key indicators—are no better than most developed nations.

This summer, everyone seemed to hold their breath as the U.S. Supreme Court ruled on the constitutionality of the Affordable Care Act of 2010. NYU Research Digest recently discussed the historic ruling with Nigam, who studies health policy.

Were you surprised by the high court’s 5-4 decision to uphold the Obama administration’s reforms?

I was pleasantly surprised. I honestly had no idea what to expect.

Some specifics of the ruling, though, puzzle me. One has to do with the provision in the Affordable Care Act that requires individual states to extend Medicaid coverage to some of the poorest Americans—those living below 133 percent of the official poverty rate. The law enforces this by withdrawing Medicaid funding from states that do not comply. I am puzzled that the court ruled that this “stick” is unconstitutional, as it’s likely to leave many people uninsured should states refuse to comply.

After the failed Clinton administration health care reform bill, you reported that the hospital industry had changed to get ready for possible passage. Did you see similar positioning this time?

Yes. Although much of the debate in the press around the 2010 Affordable Care Act focused on the individual health insurance mandate and the expected expansion of health insurance to many of the estimated 50 million Americans who are uninsured, the hospital industry focused on and incorporated other aspects of the law into its strategic planning.

Many hospitals focused on the law tying hospital revenues to hospital performance on a number of quality measures, and also the way that hospitals would be prompted to coordinate care with other hospitals, physicians, nursing homes, and ambulatory care centers.

Some, but not all, hospitals invested in electronic medical record-keeping in anticipation of, or in case of, the law’s full implementation. Even though there was a push to get hospitals to coordinate care with physicians starting in the 1990s, there had been less than significant progress.

How did hospitals prepare for the possibility that the Supreme Court might strike down the 2010 law?

Even if the Supreme Court shot down the entire reform law, the Medicare program would likely have gone ahead and experimented with changing how it reimburses hospitals and intensified pay-for-performance incentives. What the Supreme Court review did do was create uncertainty about whether there would be health insurance coverage for the uninsured. The prospect of additional uninsured represented a potential threat to future hospital revenues. Hospitals that wanted to get ready for the law held off in some cases, fearing a loss in revenues if the law was tossed out.

So now a complex, dramatic new national law has been upheld, yet many people are still unclear about its major ramifications.

The beauty of the American health-care system is that hospitals and hospital networks will vary in how they respond to the law, and some will, hopefully, develop creative ways of improving quality, coordinating care, and curtailing costs.

Hospitals will have to develop skills in using and circulating clinical data to improve care. They will have to invest as much as possible in improving operational efficiencies, as the government and private payers expect them to become leaner. In principal they will have to shift from competing to find and cover healthy patients, to competing to manage the health of patients.

Many other things, however, are uncertain. Will reform create incentives for insurers, primary care providers, and hospitals to manage chronic conditions such as diabetes more proactively?

I, for one, am optimistic the Affordable Care Act will begin to attack the problem of inefficiency in the health-care system. But it remains to be seen whether it will be successful in expanding health coverage to the uninsured.